United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 16, 2011 Decided May 15, 2012
No. 11-7039
UNITED STATES OF AMERICA, EX REL. MICHAEL L. DAVIS,
APPELLANT
v.
DISTRICT OF COLUMBIA,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:06-cv-00629)
Frederick A. Douglas argued the cause for appellant.
With him on the briefs were Curtis A. Boykin and Alex M.
Chintella.
Stacy L. Anderson, Assistant Attorney General, Office of
the Attorney General for the District of Columbia, argued the
cause for appellee. With her on the brief were Irvin B.
Nathan, Attorney General, Todd S. Kim, Solicitor General,
and Donna M. Murasky, Deputy Solicitor General.
Before: BROWN, GRIFFITH, and KAVANAUGH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge GRIFFITH.
2
GRIFFITH, Circuit Judge: Michael L. Davis brought this
qui tam 1 suit alleging the District of Columbia and its schools
violated the False Claims Act by submitting a Medicaid
reimbursement claim without maintaining adequate
supporting documentation. The district court dismissed the
case, relying on a precedent of this Court. Because we
conclude that the Supreme Court has implicitly overruled that
precedent, we reverse.
I
It is common knowledge that Medicaid is a joint federal
and state program that funds health care services for certain
groups. Less well known is the process by which Medicaid
funds are disbursed through local government agencies to care
for those in need and the safeguards in place to make sure that
the proper amounts of funds are provided for services
properly rendered. This case involves allegations of
misconduct that undermine some of those safeguards brought
by one involved in that process.
The Medical Assistance Administration (MAA), a
District agency, administered the District’s Medicaid Plan at
the time relevant to this suit. The District of Columbia Public
Schools (DCPS) is eligible for Medicaid reimbursement for
the medical and transportation services it provides to special
education students. MAA reimburses DCPS for the estimated
costs of these services throughout the year with federal funds
from the Centers for Medicare and Medicaid Services. At the
end of the year DCPS submits a reimbursement claim to
1
Qui tam is short for the Latin phrase “qui tam pro domino
rege quam pro se ipso in hac parte sequitur,” which means “who
pursues this action on our Lord the King’s behalf as well as his
own.” Rockwell Int’l Corp. v. United States, 549 U.S. 457, 463 n.2
(2007).
3
MAA that sets forth the actual costs of these services. Under
the District’s Medicaid Plan, MAA must review those claims
at least once every two years and determine whether DCPS is
owed additional funds or whether the schools must return any
overpayment. This annual filing of a reimbursement claim is
similar to how a tax return reconciles an individual’s
withholdings throughout the year with proof of the actual tax
owed at year end. Federal regulations require DCPS to
maintain financial data based on audit-quality documentation
that allows “proper determination of costs payable.” 42 C.F.R.
§ 413.20(a); see also id. § 413.24(a). To ensure that the
claimed services were actually provided, auditors check for
financial documentation and review student files for service-
specific medical records or progress notes signed by the
actual service provider. Claims lacking “the required service-
specific documentation . . . [may] not be part of any cost
settlement.” Def.’s Mot. to Dismiss Ex. D, at 3.
II
Because we are reviewing the grant of a motion to
dismiss, we accept Davis’s version of the facts and draw all
inferences in his favor. Atherton v. D.C. Office of the Mayor,
567 F.3d 672, 677 (D.C. Cir. 2009). Davis’s firm, Davis &
Associates (D&A), prepared the Medicaid reimbursement
claims made by DCPS for fiscal years 1995, 1996, and 1997.
While D&A was preparing the claim for fiscal year 1998,
DCPS replaced the firm with Maximus, Inc. D&A completed
work on the claim anyway, but DCPS never submitted it to
MAA, filing instead a claim prepared by Maximus. According
to Davis, only he had the required documentation supporting
the claim, and he never gave it back to DCPS. Upon learning
that DCPS had submitted the claim prepared by Maximus,
Davis told District officials that the claim lacked supporting
documentation and did not represent the full amount owed to
4
DCPS. Despite Davis’s warnings, DCPS made no adjustments
to its claim at that time.
In May 2000, MAA paid DCPS $10.3 million as a
tentative settlement for fiscal year 1998. MAA also hired an
auditor to review DCPS’s claims for fiscal years 1996-1998.
The auditor determined that portions of DCPS’s claims should
be disallowed because they were not adequately documented,
and MAA eventually returned to the federal government $7.6
million that had been overpaid to DCPS for 1998. On August
7, 2002, the Office of the District of Columbia Auditor
released to the public a report disclosing that for fiscal years
1996-1998, “$15 million of costs incurred for services
rendered to special education students [by DCPS] were
disallowed for Medicaid reimbursement due to the absence or
unavailability of supporting documentation,” and that
“documentation of services” had to be “immediately
improved.” Def.’s Mot. to Dismiss Ex. E, at ii.
On April 4, 2006, Davis filed this action alleging that the
District and DCPS had violated the False Claims Act,
31 U.S.C. §§ 3729-3733, by submitting the 1998
reimbursement claim without maintaining adequate
supporting documentation. The Act prohibits false or
fraudulent claims for payment from the United States,
id. § 3729(a), and authorizes private individuals to bring suit
in the government’s name to remedy such fraud, id.
§ 3730(b)(1). These whistleblower plaintiffs (known as
“relators”) are permitted to share in the government’s
recovery. Id. § 3730(d). The Act authorizes a statutory penalty
for each violation, plus treble damages for any actual damages
suffered by the government. See id. § 3729(a). Davis’s
amended complaint alleges that the submission of the 1998
reimbursement claim without supporting documentation
violates the Act’s prohibitions on knowingly presenting a
false claim, id. § 3729(a)(1), using a false statement to get a
5
false claim paid, id. § 3729(a)(2), and conspiring to get a false
claim paid, id. § 3729(a)(3). Davis asserts that submitting a
claim for Medicaid reimbursement that lacks the supporting
documentation called for by regulation defrauds the United
States because the government would not have knowingly
paid such a claim. Davis does not allege, however, that any
claimed services were not provided or that any costs were
exaggerated.
The 1986 version of the Act, which applies to this case,
bars suits “based upon the public disclosure of allegations or
transactions . . . unless the action is brought by the Attorney
General or the person bringing the action is an original source
of the information.” 31 U.S.C. § 3730(e)(4)(A) (2006)
(amended 2010). An original source is “an individual who has
direct and independent knowledge of the information on
which the allegations are based and has voluntarily provided
the information to the Government before filing an action
under this section which is based on the information.” Id.
§ 3730(e)(4)(B). In short, if a qui tam suit is “based upon” a
“public disclosure,” the suit is barred unless the relator is an
“original source.”
On December 23, 2008, the district court granted in part
the defendants’ motion to dismiss Davis’s qui tam action.
United States ex rel. Davis v. District of Columbia (Davis I),
591 F. Supp. 2d 30 (D.D.C. 2008). The court dismissed DCPS
as a defendant because D.C. law provides that it cannot be
sued directly. Id. at 40. The court also dismissed Davis’s
treble damages and conspiracy claims because he had not
alleged actual damage to the government. Id. at 39-40. The
court rejected, however, the District’s challenge to its subject
matter jurisdiction, holding that even though the Auditor’s
report had publicly disclosed the alleged fraud, Davis was an
original source. Id. at 36-37. The parties proceeded with
6
discovery and Davis filed an amended complaint. Davis then
moved for summary judgment and the District moved again to
dismiss for lack of subject matter jurisdiction.
This time, the district court agreed and concluded Davis
was not an original source under our decision in United States
ex rel. Findley v. FPC-Boron Employees’ Club, 105 F.3d 675
(D.C. Cir. 1997). United States ex rel. Davis v. District of
Columbia (Davis II), 773 F. Supp. 2d 21, 32 (D.D.C. 2011).
In Findley, we held that a relator must provide his information
to the government not only prior to filing suit but “prior to
any public disclosure.” 105 F.3d at 690. Because there was no
evidence that Davis notified the federal government of the
alleged fraud before the 2002 Auditor’s report, the court
concluded it was without jurisdiction to hear his claim. Davis
II, 773 F. Supp. 2d at 33-34.
Davis timely appealed both the district court’s conclusion
that it lacked subject matter jurisdiction and its dismissal of
his claims for treble damages and conspiracy. We take
jurisdiction under 28 U.S.C. § 1291.
III
A
Davis first argues that his suit is not “based upon” the
August 2002 Auditor’s report. We have explained that a suit
is “based upon” publicly disclosed “allegations or
transactions” when the allegations in the complaint are
“substantially similar” to those in the public domain. Findley,
105 F.3d at 682. This rule prevents suits by those other than
an “original source” when the government already has enough
information “to investigate the case and to make a decision
whether to prosecute” or where the information “could at least
7
have alerted law-enforcement authorities to the likelihood of
wrongdoing.” U.S. ex rel. Springfield Terminal Ry. v. Quinn,
14 F.3d 645, 654 (D.C. Cir. 1994) (quoting United States ex
rel. Joseph v. Cannon, 642 F.2d 1373, 1377 (D.C. Cir. 1981)).
The 2002 Auditor’s report disclosed that, for fiscal years
1996-1998, DCPS was not reimbursed for $15 million worth
of services provided to special education students but not
adequately documented. Def.’s Mot. to Dismiss Ex. E, at ii.
The report revealed to the public the “allegation” that DCPS
did not have adequate supporting documentation for its 1998
Medicaid reimbursement claim and provided ample reason for
the government to investigate further. See Springfield
Terminal, 14 F.3d at 654. Davis contends that his allegation is
more specific than what was in the Auditor’s report, and that
is true. He points out the 1998 claim lacked any
documentation while the Auditor’s report found some for
three years, just not enough. But providing “more specific
details about what happened” does not change the fact that
Davis’s allegation is substantially similar to and therefore
“based upon” the publicly disclosed allegations in the
Auditor’s report. United States ex rel. Settlemire v. District of
Columbia, 198 F.3d 913, 919 (D.C. Cir. 1999).
Davis’s claim can proceed only if he is an “original
source.”
B
The District argues that Davis is not an original source
because he did not prove he voluntarily provided his
information to the government before filing suit, let alone that
8
he did so before Findley’s public-disclosure deadline. 2 The
district court found that he had provided his information to the
government before filing suit, relying on two letters Davis
received from federal officials which acknowledged that he
had written them alleging “Medicaid fraud” and “diversion of
Medicare funds.” Davis II, 773 F. Supp. 2d at 32. At oral
argument, we questioned whether these letters, vague as they
are, were sufficient. After argument, Davis provided us with
other letters he sent to the government and an affidavit
asserting their authenticity. 3 Most relevant, in a letter dated
August 19, 2004, he informed the Inspector General of the
U.S. Department of Health & Human Services that the
District and DCPS “do not have in their possession
documentation to support a drawdown of federal medicaid
funds for [1996-1998].” Appellant’s Mot. to Suppl. R.,
Attach. at 1. This letter removed any concern we had about
whether Davis had “provided the information to the
Government” before filing suit.
Relying upon our decision in Findley, the district court
dismissed Davis’s suit because he failed to provide his
information to the government prior to the publication of the
Auditor’s report. Davis II, 773 F. Supp. 2d at 33-34. Davis
argues that the Supreme Court eliminated this requirement in
2
The District concedes on appeal that Davis had direct and
independent knowledge that the 1998 claim for Medicaid
reimbursement lacked documentation. Appellee’s Br. 34.
3
Although we normally do not consider evidence presented
for the first time on appeal, we have discretion to make “limited
exceptions to this rule when ‘injustice might otherwise result.’” In
re AOV Indus., Inc., 797 F.2d 1004, 1012 (D.C. Cir. 1986) (quoting
Singleton v. Wulff, 428 U.S. 106, 121 (1976)). Because these new
documents go “to the heart of the contested issue, it would be
inconsistent with this court’s own equitable obligations . . . to
pretend that they do not exist.” Id. at 1013.
9
Rockwell International Corp. v. United States, 549 U.S. 457
(2007). The district court acknowledged that Rockwell raised
doubts about Findley but concluded that it would not “lightly
infer an abrogation of settled precedent.” Davis II, 773 F.
Supp. 2d at 33. Although we have previously expressed doubt
about whether this part of Findley survived Rockwell, see
United States ex rel. Davis v. District of Columbia, 413 F.
App’x 308, 310 (D.C. Cir. 2011) (noting this concern but
dismissing a related suit by Davis on different grounds), we
have not yet had occasion to address the issue squarely.
Today we do, and we agree with Davis.
Findley established this requirement based on its reading
of the statute and a resulting policy concern. First, interpreting
§ 3730(e)(4)’s text, the court concluded that “the allegations”
referred to in subparagraph (B) were the publicly disclosed
“allegations or transactions” in subparagraph (A), “since those
are the only allegations mentioned at all in section
3730(e)(4).” Findley, 105 F.3d at 690. From this, the court
determined that the word “information” in both subparagraphs
referred to the information “on which the [publicly disclosed]
allegations are based.” Id. (alteration in original). Under this
reading, the information an original source must provide to
the government is the information underlying the publicly
disclosed allegations.
Findley then turned to the question at issue here: when
must the relator provide this information to the government?
Although the text seems to impose a clear deadline of “before
filing an action,” Findley held that “the only reading of the
statute that accounts for the requirement that an ‘original
source’ voluntarily provide information to the government
before filing suit, and Congress’ decision to use the term
‘original source’ . . . is one that requires an original source to
provide the information to the government prior to any public
10
disclosure.” Id. at 691. The court offered two primary reasons
for this reading. First, it would be odd to call someone an
“original source” of information if the government had
already obtained the relevant information from the public. See
id. Second, and more centrally, Findley surmised that “[o]nce
the information has been publicly disclosed . . . there is little
need for the incentive provided by a qui tam action.” Id. A
relator adds little value, so the thinking goes, by repeating
what is already publicly available and known to the
government.
In Rockwell, the Supreme Court rejected Findley’s
reading of what information a relator must provide the
government, concluding that the word “information” in
§ 3730(e)(4) refers to “the information on which the relator’s
allegations are based[, not] the information on which the
publicly disclosed allegations that triggered the public-
disclosure bar are based.” 549 U.S. at 470. With the wrong
“information” in mind, Findley’s argument that the
information must be provided to the government not only
before suit is filed but before a public disclosure is made
simply unravels. Findley’s concern about why Congress used
the term “original source” is answered: The relator can be an
“original source” to the government of his information even if
the publicly disclosed information came from someone else.
And Findley’s judgment that “[o]nce the information has
been publicly disclosed . . . there is little need for the
incentive provided by a qui tam action,” 105 F.3d at 691, no
longer follows because Rockwell changed the premise. We
now understand that the “information” provided is the
relator’s. Importantly, the relator’s information can be
different and more valuable to the government than the
information underlying the public disclosure, which might be
nothing more than speculation or rumors. See Rockwell, 549
11
U.S. at 472. The relator may have an eyewitness account or
important documents supporting the public allegation, but not
available from any other source, which could aid the
government. Findley’s reading of the statute assumed the
relator could provide nothing new after a public disclosure.
Rockwell rejected that view. Given this, it is apparent that
Findley’s categorical rule bars productive suits. See United
States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d
13, 24-25 (1st Cir. 2009) (concluding that Rockwell
“substantially undercuts” Findley and shows that Findley “has
the potential to bar productive suits”). Findley’s requirement
no longer has any textual basis, and the policy judgment upon
which it relied contradicts Rockwell’s rationale.
Applying the 1986 version of the Act, we will no longer
require that a relator provide information to the government
prior to any public disclosure of allegations substantially
similar to the relator’s and will instead enforce only the text’s
deadline of “before filing an action.” 4 Because Davis satisfies
4
Although Rockwell corrected Findley’s tendency to bar some
productive suits, the 1986 Act’s approach is itself imperfect
because it allows suits in which the relator’s information does in
fact mirror the publicly disclosed information, the situation Findley
assumed would always apply. Congress has since addressed this
problem by amending the statute to provide incentives to only those
relators whose information adds value. The Act now defines an
“original source” as
an individual who either (i) prior to a public disclosure . . . has
voluntarily disclosed to the Government the information on
which allegations or transactions in a claim are based, or (2)
who has knowledge that is independent of and materially adds
to the publicly disclosed allegations or transactions, and who
has voluntarily provided the information to the Government
before filing an action under this section.
12
the requirements of § 3730(e)(4)(B), we conclude that he is an
original source and that the district court has jurisdiction over
his claims.
IV
Davis also argues that the district court wrongly
dismissed his claims for treble damages and conspiracy on the
ground that he failed to allege actual damage to the United
States. He argues that the entire amount the federal
government paid to DCPS in 1998 constitutes damages
because the government would not have paid DCPS anything
had it known there was no documentation for its
reimbursement claim. We conclude, however, that the district
court was right to find that the government suffered no
damages.
The False Claims Act imposes two types of liability:
First, a defendant who submits a false claim . . . is liable
for civil penalties regardless of whether the government
shows that the submission of that claim caused the
government damages. Second, the defendant is liable for
“3 times the amount of damages which the Government
sustains because of the act of [the defendant].”
United States v. Sci. Applications Int’l Corp., 626 F.3d 1257,
1277-78 (D.C. Cir. 2010) (quoting 31 U.S.C. § 3729(a))
31 U.S.C. § 3730(e)(4)(B) (Supp. 2010). Thus, as the district court
explained, the Act now “allows a relator to proceed if he either
meets the Findley pre-public disclosure notification requirement, or
if he possesses knowledge independent of the public disclosure that
materially adds to the public disclosure, and he provides the
information to the Government prior to filing suit.” Davis II, 773 F.
Supp. 2d at 33 n.9.
13
(citation omitted). Our decision in Science Applications sets
forth the proper framework for determining damages in qui
tam actions. There, a contractor who had agreed to provide a
federal agency with expert advice certified it had no conflicts
of interest. The contractor provided the advice but failed to
disclose several conflicts. Id. at 1261-62. Like Davis does
here, the government sought damages equal to the full amount
it had paid the contractor and relied on evidence showing it
would not have paid the contractor anything had it known of
the conflicts. But we explained that this evidence only proved
causation, not damages, because False Claims Act damages
are meant to “put[] the government in the same position as it
would have been if the defendant’s claims had not been
false.” Id. at 1278. Thus, “[t]o establish damages, the
government must show not only that the defendant’s false
claims caused the government to make payments that it would
have otherwise withheld, but also that the performance the
government received was worth less than what it believed it
had purchased.” Id. at 1279. Although the government was
not entitled to recover all of its payments, we concluded that a
jury could find that the value of the contractor’s performance
“was compromised by the appearance of bias created by the
company’s failure to live up to its contractual conflict of
interest obligations.” Id. at 1278. We therefore instructed that
the proper measure of damages was the difference in value
between “services tainted by potential conflict” and the
untainted services promised. Id. at 1280.
Under the Medicaid program, the federal government
pays for specified services to be provided to eligible
recipients. In this case, Davis does not allege that any services
paid for were not provided. The sole defect Davis claims is
the failure to maintain documentation for those services.
Unlike the contractor’s undisclosed conflicts in Science
Applications, the defect in this case in no way calls into
14
question the value of the medical care provided by DCPS.
The purpose of maintaining documentation is to ensure that
the government pays only for services actually rendered.
Because all agree that the services paid for were provided, the
maintenance of documents to prove that they were has no
independent monetary value. This is the rare case in which
there is no allegation that what the “government received was
worth less than what it believed it had purchased.” Id. at
1279; cf. United States ex rel. Schwedt v. Planning Research
Corp., 59 F.3d 196, 200 (D.C. Cir. 1995) (finding actual
damage because, unlike here, the defendant’s false claims had
caused the government to pay for “useless goods”). A server’s
failure to bring a receipt after dinner causes no harm when
you know you’ve been properly charged. The same is true
here: The government got what it paid for and there are no
damages. Cf. Ab-Tech Constr., Inc. v. United States, 31 Fed.
Cl. 429, 434 (1994); United States v. Woodbury, 359 F.2d
370, 379 (9th Cir. 1966). If Davis proves his claims he may
still be eligible to share in the statutory penalties assessed
against the District.
Finally, the District invokes the Act’s six-year statute of
limitations to bar some of Davis’s claims. See 31 U.S.C.
§ 3731(b)(1). Because the district court had no occasion to
address this question, we leave it the opportunity to do so in
the first instance on remand.
V
For the foregoing reasons, the district court’s order
dismissing the case for lack of jurisdiction is vacated and the
case is remanded for further proceedings consistent with this
opinion.
So ordered.